Most Nutrition North recipients complying with rules: auditors

The Northwest Co., which runs Northern and Northmart stories in Nunavut such as this one in Cape Dorset, was one of six registered recipients of the Nutrition North Canada subsidy that was subject to federal auditors in 2015. They found the company was following all the rules when it came to applying the subsidy to perishable and nutritious foods. (FILE PHOTO)

The Northwest Co., which runs Northern and Northmart stores in Nunavut and elsewhere, claimed nearly $49 million in Nutrition North Canada subsidies between April 2013 and September 2014 and, according to federal auditors, followed all the rules passing on that subsidy to shoppers.

You won’t find the most recent NNC compliance reports on the Indigenous and Northern Affairs Canada website—technical problems have caused uploading delays, say media contacts.

But officials recently forwarded those electronic reports to Nunatsiaq News.

The Northwest Co. clearly received more subsidy dollars than any of the other companies audited last year. And they got two thumb’s up in areas such as transparency, program delivery and visibility, as well as accuracy and validity of the company’s claims.

Nutrition North, which replaced the old federal Food Mail subsidy in April 2011, provides air freight subsidies to northern companies, country food distributors and southern suppliers who sell certain nutritious and perishable foods to authorized isolated northern communities.

There are two levels of subsidy—a higher one for things such as fruits, vegetables, milk products, meats and infant formula and a lower subsidy for items such as butter, flour, crackers and juice.

Every year, the federal government picks out certain subsidy recipients for auditing.

Last year, Deloitte LLP chartered accountants conducted audits on six different businesses under contract with NNC.

Depending on company year-end practices and accounting procedures, Deloitte’s investigations focus on time frames between April 2012 and September 2014.

Along with the Northwest Co., auditors in 2015 also looked at La Fédération des co-opératives du Nouveau-Québec (FCNQ) which operates co-op stores in 14 Nunavik communities.

That audit, which covers July 2012 to July 2013, says the FCNQ claimed just over $8 million in food freight subsidies.

Despite finding no “significant deviations in the samples we chose,” auditors did find small discrepancies in reporting and coding of items and some information missing when it came to examining sample claims because “the Recipient’s systems only retained shipment details for a one-year period.”

“The Recipient should ensure the accuracy and completeness of reports prior to these being submitted to AANDC (now INAC),” the auditors recommend in their conclusion.

The only other company audited that services Nunavut communities was Cactus Holdings Ltd.—M&M Meats, a registered southern supplier of frozen, prepared foods with a franchise in Yellowknife.

From April 2012 to September 2014, M&M claimed $145,188 in subsidies for food orders sent to 39 communities across Nunavut and the Northwest Territories.

As with the FCNQ, Deloitte auditors found no “significant deviations” in the sample claims tested, but they did recommend that M&M clearly inform clients, in writing, that they cannot sell or ship subsidized items to restricted organizations.

Restricted organizations that are not eligible for the NNC subsidy include mining companies, oil and gas companies, electricity companies, exploration companies and camps, and military establishments or operations.

In fact, selling to restricted organizations seems to have gotten one registered NNC supplier in hot water during the most recent audit.

Rampart Rentals, an independent grocer based in Norman Wells, NWT, which sells subsidized food items to local residents, claimed $627,098 in subsidies between April 2012 and September 2014, according to the audit report.

Auditors noted that the store had been selling large quantities of subsidized goods to two mining camps in the area.

“A subsidy is not directly provided to the mining camps; however, if the items are considered eligible under the NNC Program guidelines, they are often claimed for the subsidy. Therefore, the Recipient is receiving reimbursement of a subsidy that was not passed on,” the report notes.

Absent records prevented auditors from determining exactly how much food was shipped to the mining camps during the time frame examined, and how much subsidy was being skimmed off.

But from the receipts that were available, they concluded Rampart Rentals claimed $7,601 in ineligible expenses and suggested the federal government recover that money.

Auditors also found inconsistent application of the subsidy and poor record keeping at Rampart. They recommended the store tighten up controls of the subsidy program.

“Within the 33 individual items selected, we identified that the subsidy provided to the customer was 12 per cent less than the amount claimed by the Recipient. Profit margins are not formally documented or assessed.”

They also suggest Rampart “retain detailed sales records for any transactions relating to the Program,” for the length of time specified under the NNC contract.